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From Kirsten Bischoff, Opalesque New York:

As the hedge fund industry recovers and managers begin to rebuild asset bases, much of the focus is on determining how the financial crisis has impacted asset flows within the industry, and if these changes indicate new paradigm shifts. There are indications that while investors do not want to miss out on the strong performance hedge fund managers have had in the aftermath of the financial crisis, they are still wary towards the industry in general and their cautiousness is showing in the distribution of new assets.

Asset flows tracked by BarclayHedge indicate that the larger, older, more established hedge fund firms with strong infrastructures are seeing the majority of inflows. This is largely attributed to investors maintaining a sense of caution returning to an industry that was hit by liquidity impairments that saw approximately $174bn (12%) of industry assets locked up in some way during the height of the liquidity crisis (Credit Suisse Tremont Hedge Fund Index). Although, currently only $61bn remains illiquid (as of March 31, 2010), investors are now more vigilant than ever in their quest for exerting more control over their assets, whether by investing in only the most liquid strategies, negotiating lesser liquidity terms with managers, or maintaining control through investments via managed account platforms.

Industry observations from hedge fund administration firms such as Custom House have indicated ......................

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